Rehab with HELOC vs Hard money

Kansas City, Kansas
BRRRR - Buy, Rehab, Rent, Refinance, Repeat
7moFollow

Rehab with HELOC vs Hard money

Octavio Dondiz
Member since 2025 · 6 posts · 3 votes

Hi BP community,

 I'm in the process of buying my first rental property and would appreciate some guidance on how you would approach the financing considering my current resources.

Context: my plan is to BRRR the property and keep it as a long-term rental. I currently have ~$200K liquid cash reserves and an unused HELOC with a $350K credit limit (it's actually an SBLOC but pretty much same thing).

Assumptions for the deal based on what I'm seeing in the market: 

- $180K purchase price

- $60K rehab (includes 15% cash for contingencies)

- 3-month rehab 

- $260K ARV


I'm torn on how much money I should borrow -if any at all- during the purchase + rehab phase given I technically have enough cash &not considering conventional despite my 800 credit score wouldn't be possible given minimum seasoning period is 6 to 12 months based on my research) to cover those expenses myself.

What approach would you take?

A) fund myself: Buy with cash, rehab with HELOC, refinance with DSCR loan

B) partial funding: Buy with hard money, rehab with HELOC, refinance with DSCR loan

C) outsource funding: Buy+Rehab with hard money, then refinance 

Pros of borrowing: I would have more cash reserves for emergencies. Cons: I would have to pay interests on the hard money loan (at ~10 interest rate).

I chatted with 3 lenders (brokers), and they suggested using the path C (I.e. not using my own funds and going through the hard-money route instead) claiming that would help me get more money out of the deal through the DSCR cash-out refinance. They claimed with path C I'm more likely to secure 80% back in the cash out refinance (keeping only 20% down whereas path A and B would likely lead to me getting 70 or 75% back in the cash-out refinance. They claimed that lenders are less likely to let you keep only 20% down if you paid for the whole thing in cash. Is this accurate? What path would you choose with all the above considerations/assumptions?

Thanks!

2Reply
414 views

Most Popular Reply

Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
7mo
Quote from @Octavio Dondiz:

Hi BP community,

 I'm in the process of buying my first rental property and would appreciate some guidance on how you would approach the financing considering my current resources.

Context: my plan is to BRRR the property and keep it as a long-term rental. I currently have ~$200K liquid cash reserves and an unused HELOC with a $350K credit limit (it's actually an SBLOC but pretty much same thing).

Assumptions for the deal based on what I'm seeing in the market: 

- $180K purchase price

- $60K rehab (includes 15% cash for contingencies)

- 3-month rehab 

- $260K ARV


I'm torn on how much money I should borrow -if any at all- during the purchase + rehab phase given I technically have enough cash ¬ considering conventional despite my 800 credit score wouldn't be possible given minimum seasoning period is 6 to 12 months based on my research) to cover those expenses myself.

What approach would you take?

A) fund myself: Buy with cash, rehab with HELOC, refinance with DSCR loan

B) partial funding: Buy with hard money, rehab with HELOC, refinance with DSCR loan

C) outsource funding: Buy+Rehab with hard money, then refinance 

Pros of borrowing: I would have more cash reserves for emergencies. Cons: I would have to pay interests on the hard money loan (at ~10 interest rate).

I chatted with 3 lenders (brokers), and they suggested using the path C (I.e. not using my own funds and going through the hard-money route instead) claiming that would help me get more money out of the deal through the DSCR cash-out refinance. They claimed with path C I'm more likely to secure 80% back in the cash out refinance (keeping only 20% down whereas path A and B would likely lead to me getting 70 or 75% back in the cash-out refinance. They claimed that lenders are less likely to let you keep only 20% down if you paid for the whole thing in cash. Is this accurate? What path would you choose with all the above considerations/assumptions?

Thanks!


B) partial funding: Buy with hard money, rehab with HELOC, refinance with DSCR loan

Sounds like the most appropriate option here. While you will save more money using your own cash + HELOC, you may also need more cash for holding costs and in case your rehab scope of work is higher than anticipated. The last thing you'd want is to end up running out of money and with a lopsided deal that is not able to be financed on a long term loan.. 

I think a lot of investors underestimate the amount of cash needed to execute a flip/BRRRR.. Unless this is your 10th exit, doing a combination will really help preserve liquidity and anticipate longer rehabs/higher costs 
[email protected]818-269-7983
LuxePrivate Investments LLC 570 Reviews
WebsiteView Page
3Reply
See this reply in the discussion

13 Replies

Jump to latestLatest
  • Pierre Guirguis
    Lender · Marlboro, NJ · Member since 2025 · 243 posts · 150 votes
    7mo

    Interesting scenario. With the numbers you laid out, you're basically all-in around $240k between the purchase and rehab. In most BRRRR situations the refinance is driven by the appraised value and the DSCR guidelines, not whether you used your own cash or hard money on the front end. Hard money can make the payoff cleaner for the refi, but it doesn't automatically mean you'll be able to pull 80% back versus 70–75%.

    If the property appraises near your $260k ARV and the rents support the DSCR loan, the refinance is usually sized off that new value.

    A lot of investors end up looking at this less as a financing question and more as a liquidity question, whether they'd rather keep more cash on hand or minimize borrowing costs during the rehab. With $200k in liquidity and a HELOC available, you have a lot of flexibility either way.

    1Reply
  • Matthew Bernal
    Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
    7mo

    How confident are you in the $260K ARV and what rent are you expecting after the rehab?

    The reason I ask is your deal is roughly $240K all-in, so the refinance outcome will depend heavily on those two numbers.

    Also, regarding what the lenders told you about 80% vs 70–75% cash-out, that can depend heavily on whether the refi is treated as rate-and-term vs cash-out and the DSCR lender's seasoning requirements.

    I’ve seen investors structure these a few different ways depending on how much capital they want to recycle vs how much liquidity they want to keep.

    Happy to compare notes if you want to walk through the numbers more closely.

    1Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 525 votes
    7mo

    If you pay all cash you can use delayed financing to get the cash out of the deal at 80%. Generally, that will not be at the new appraised value if you're doing a BRRRR.

    Delayed financing helped when we were in a sellers' market and the investor needed cash to close the deal. From what I'm hearing from clients, most markets are a buyers' market or neutral so this is not currently necessary. It will depend on your individual market. Of course most sellers and agents would like a cash deal but it's being realistic about the market you're in and who has more negotiating power in tht market.

    If you want to do a BRRRR, you can get a fix and flip loan and get up to 90% of the purchase price and 100% of the rehab done on draws. The options will depend on the borrower's credit score and location of the property. You can then repay the hard money loan with the DSCR loan. To get the new appraised value, there's generally a seasoning or waiting period between transactions. You will have more options after 6 months with DSCR loans but there are some options at 3 months or no seasoning.

    It also depends on how confident are you in the rehab crew you will be using and the overall timeline besides the lending costs. Since you have the cash and the HELOC any of the options can work for funding of the initial rehab. It depends on if you want to leverage to do more than one project or if would prefer to start with just one. If you're comfortable using your own money perhaps you use your own cash and for the rehab and then you use a DSCR loan to refinance into longer term financing since it has a shorter seasoning period compared to a conventional loan. Happy to connect to discuss further.

    [email protected]818-770-0340
    Bright Skyline518 Reviews
    WebsiteView Page
    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    7mo
    Quote from @Octavio Dondiz:

    Hi BP community,

     I'm in the process of buying my first rental property and would appreciate some guidance on how you would approach the financing considering my current resources.

    Context: my plan is to BRRR the property and keep it as a long-term rental. I currently have ~$200K liquid cash reserves and an unused HELOC with a $350K credit limit (it's actually an SBLOC but pretty much same thing).

    Assumptions for the deal based on what I'm seeing in the market: 

    - $180K purchase price

    - $60K rehab (includes 15% cash for contingencies)

    - 3-month rehab 

    - $260K ARV


    I'm torn on how much money I should borrow -if any at all- during the purchase + rehab phase given I technically have enough cash ¬ considering conventional despite my 800 credit score wouldn't be possible given minimum seasoning period is 6 to 12 months based on my research) to cover those expenses myself.

    What approach would you take?

    A) fund myself: Buy with cash, rehab with HELOC, refinance with DSCR loan

    B) partial funding: Buy with hard money, rehab with HELOC, refinance with DSCR loan

    C) outsource funding: Buy+Rehab with hard money, then refinance 

    Pros of borrowing: I would have more cash reserves for emergencies. Cons: I would have to pay interests on the hard money loan (at ~10 interest rate).

    I chatted with 3 lenders (brokers), and they suggested using the path C (I.e. not using my own funds and going through the hard-money route instead) claiming that would help me get more money out of the deal through the DSCR cash-out refinance. They claimed with path C I'm more likely to secure 80% back in the cash out refinance (keeping only 20% down whereas path A and B would likely lead to me getting 70 or 75% back in the cash-out refinance. They claimed that lenders are less likely to let you keep only 20% down if you paid for the whole thing in cash. Is this accurate? What path would you choose with all the above considerations/assumptions?

    Thanks!


    B) partial funding: Buy with hard money, rehab with HELOC, refinance with DSCR loan

    Sounds like the most appropriate option here. While you will save more money using your own cash + HELOC, you may also need more cash for holding costs and in case your rehab scope of work is higher than anticipated. The last thing you'd want is to end up running out of money and with a lopsided deal that is not able to be financed on a long term loan.. 

    I think a lot of investors underestimate the amount of cash needed to execute a flip/BRRRR.. Unless this is your 10th exit, doing a combination will really help preserve liquidity and anticipate longer rehabs/higher costs 
    [email protected]818-269-7983
    LuxePrivate Investments LLC 570 Reviews
    WebsiteView Page
    3Reply
  • Matthew Bernal
    Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
    7mo

    The 80% LTV claim from those lenders is real but overstated as a reason to use hard money.

    Cash purchases do often get capped at 75% on DSCR refis lenders use lesser of cost or ARV. Hard money gets you to 80%. On $260K ARV that's $13K more out. But 3 months of hard money interest on your deal costs $6K-$8K. Net benefit is maybe $5K.

    The real reason to go hard money with your position isn't the LTV — it's keeping $200K liquid for your next move instead of sitting in a renovation for 6 months.

    With an 800 credit score and clean deal numbers your DSCR refi works well either way. Happy to show you exact figures on both paths so you can decide with real numbers not estimates.

    Is there a specific timeline you're working toward on closing?

    2Reply
  • Tommy Reeves
    Investor · Baltimore, MD · Member since 2026 · 10 posts · 11 votes
    7mo

    Done 10 BRRRRs in Baltimore all with hard money on the front end. The real reason to use HML isnt the extra 5% LTV on the refi, its keeping your cash free so you can jump on the next deal when it shows up. Other thing nobody mentions is draw schedules actually keep your rehab honest. When the money is tied to inspections your contractor stays on timeline instead of dragging things out.

    1Reply
  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 662 votes
    7mo

    No matter how you slice it, you are leaving money into this deal. There's practically no spread between project cost and ARV and if there are any delays/overages you can easily be under water.

    1Reply
  • Marcus Delgado
    Investor · Tampa, FL · Member since 2026 · 24 posts · 18 votes
    7mo

    Did the same thing on my two BRRRRs in Tampa. Hard money on the front end, DSCR refi after rehab and seasoning. The math on 80 vs 75% LTV sounds good on paper but the carrying costs eat most of that difference. Real advantage was keeping my cash free so I could move on the next deal without waiting around.

    1Reply
  • Jorge VazquezBusiness Member
    Real Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 700 votes
    7mo

    Honestly, this deal just isn’t strong enough. The average deal I go after has about $75K to $100K in equity built in you can find them if you’re patient. You also want to plan to only pull back around 50% of that 20% down when you refinance, especially if you’re using a flip loan to convert it into a rental. Personally, I’d use my own money, keep it simple, and refinance in about 6 months. I’ve done a bunch of BRRRRs like this and once you see a few side by side, it becomes really clear which ones work and which ones don’t.

    Graystone Investment Group519 Reviews
    WebsiteView Page
    1Reply
  • Octavio Dondiz
    OP
    Member since 2025 · 6 posts · 3 votes
    6mo
    After analyzing multiple potential deals, I can now see how this one wouldn’t have made sense given the thin margin of error and insufficient profits to justify the project. I kept looking for other options and ended up finding a much more attractive one, standing at $325k purchase price, $40K rehab, and $430-450K ARV -positioning it as a much more solid alternative. Thank you for all the suggestions and resources offered!
    0Reply
  • J CastroBusiness Member
    Lender · Florida · Member since 2025 · 755 posts · 266 votes
    6mo

    Hi @Octavio Dondiz, welcome to BP!
    Solid first deal setup—you’ve got great liquidity to work with.

    Quick answer: the idea that using hard money guarantees you 80% cash-out vs 70–75% if you use your own funds isn't really accurate. DSCR refi terms are driven more by the lender, LTV limits, DSCR, and seasoning—not where your initial capital came from. Some lenders will go to 80%, many cap at 75% regardless.

    Given this is your first BRRRR, I'd lean Option A (cash + HELOC for rehab) or a light version of it. You’ll:

    • Maximize profit (no hard money interest/points)
    • Reduce execution risk during the rehab
    • Still keep liquidity via your HELOC

    Also worth noting—your spread is pretty tight ($240K all-in vs $260K ARV), so this likely won't be a full BRRRR anyway. Because of that, minimizing costs matters more than maximizing leverage.

    If this were deal #5+, I’d push leverage harder. For deal #1, I’d prioritize control and margin over speed.

    JCREIG Capital Funding
    WebsiteView Page
    1Reply
  • Vijay FriedmanBusiness Member
    Miami, FL · Member since 2026 · 766 posts · 124 votes
    5mo
    Quote from @Octavio Dondiz:

    Hi BP community,

     I'm in the process of buying my first rental property and would appreciate some guidance on how you would approach the financing considering my current resources.

    Context: my plan is to BRRR the property and keep it as a long-term rental. I currently have ~$200K liquid cash reserves and an unused HELOC with a $350K credit limit (it's actually an SBLOC but pretty much same thing).

    Assumptions for the deal based on what I'm seeing in the market: 

    - $180K purchase price

    - $60K rehab (includes 15% cash for contingencies)

    - 3-month rehab 

    - $260K ARV


    I'm torn on how much money I should borrow -if any at all- during the purchase + rehab phase given I technically have enough cash ¬ considering conventional despite my 800 credit score wouldn't be possible given minimum seasoning period is 6 to 12 months based on my research) to cover those expenses myself.

    What approach would you take?

    A) fund myself: Buy with cash, rehab with HELOC, refinance with DSCR loan

    B) partial funding: Buy with hard money, rehab with HELOC, refinance with DSCR loan

    C) outsource funding: Buy+Rehab with hard money, then refinance 

    Pros of borrowing: I would have more cash reserves for emergencies. Cons: I would have to pay interests on the hard money loan (at ~10 interest rate).

    I chatted with 3 lenders (brokers), and they suggested using the path C (I.e. not using my own funds and going through the hard-money route instead) claiming that would help me get more money out of the deal through the DSCR cash-out refinance. They claimed with path C I'm more likely to secure 80% back in the cash out refinance (keeping only 20% down whereas path A and B would likely lead to me getting 70 or 75% back in the cash-out refinance. They claimed that lenders are less likely to let you keep only 20% down if you paid for the whole thing in cash. Is this accurate? What path would you choose with all the above considerations/assumptions?

    Thanks!

    @Octavio Dondiz

    With those numbers, I'd be careful assuming the BRRRR will return most of your capital. If purchase is $180K, rehab is ~$60K, and ARV is only $260K, the spread looks pretty thin after closing costs, holding costs, lender fees, and any rehab overruns.

    At 75% of ARV, you're around a $195K refinance before lender adjustments, which may leave a good amount of cash still tied up. So I'd run this less as "how much can I borrow?" and more as "does the final DSCR refi actually work after stabilization?"

    If you do proceed, I’d personally preserve liquidity where possible, but I’d also avoid expensive hard money unless the numbers clearly justify it. 

    786-656-0387
    DreamPoint Capital
    WebsiteView Page
    0Reply
  • Richard Golding
    Contractor · NYC/Los Angeles · Member since 2019 · 91 posts · 55 votes
    5mo

    Walking away from that first deal was the sharpest operational move you could have made. Your initial math on the 180k purchase and 60k rehab against a 260k ARV left you with zero margin for error. Between holding costs lender fees and the inevitable field surprises a 20k spread means you were essentially volunteering your time to build a house for the bank.

    Your new asset at a 325k purchase with a 40k rehab and a 430k to 450k ARV completely fundamentally changes your balance sheet risk. You went from chasing a thin paper estimate to locking in a massive 65k to 85k structural equity cushion before you even break ground on the renovation. Because you have 200k cash and a 350k liquid line of credit you can easily buy this asset completely cash or deploy your line to keep your liquid reserves untouched. This strategy gives you absolute control over the timeline saves you thousands in upfront hard money points and interest and lets you season the property cleanly on your own balance sheet before executing a high leverage DSCR refinance at absolute peak market value.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free